Stocks Set to Test Lows as Confidence Wanes

Stocks extended their losing streak for a third straight day, setting the course to retest recent lows, as investor doubt about the effectiveness of government intervention seeped deeper into the market.

The Dow Jones Industrial Average shed 411.30, or 4.7 percent, to close at 8282.66. Twenty-nine of the 30 components finished lower; only General Motors advanced.

The Nasdaqdropped 5.2 percent to close at 1499.21, breaking through its recent low of 1505.90.

The S&P 500 index shed 5.2 percent to close at 852.30 -- four points shy of puncturing its Oct. 27 low of 848.92.

Adding to the already jittery mood, Paulson announced a major shift in the $700 billion rescue fund: That the government will back away from buying troubled mortgage assets from firms and use the money instead for a second round of capital injections into financial institutions that would match private funds.

General Motors was the only gainer on the Dow, rising 5.5 percent, amid expectations that auto makers will get government help. Ford advanced 2.2 percent.

There's some buzz in the market that insurers could beat auto makers to the punch and get a bailout first. Genworth shares , which have dropped to around $1 from $25 in May, rose sharply pre-market on this buzz but then fell 19 percent in regular trading.

Hedge-fund manager William Ackman told Reuters that GM should be restructured before it can receive any government cash. Other analysts say, if you bail out the auto makers, then where do you draw the line? Do you bail out Starbucks ?

Home values continued their downward spiral with their seventh consecutive quarterly decline, real estate Web site Zillow.com said.

Housing stocks continued to get hammered: Hovnanian and Lennar shed more than 12 percent.

Goldman Sachs continued its decline as the firm contemplates a new direction after the credit crisis.

Energy producers also were under pressure as oil prices held below $60 a barrel. Dow components ExxonMobil and Chevron shed more than 5 percent each.